Facebook IPO: Was it a quick success or a slow failure? – Part 1

The Facebook went public on May 18, last Friday and over the period of six days a lot has happened. At the close of business at Nasdaq, FB was trading at $32.05 a share. The stock was made open for the public at the book value of $38 a pop. This is a huge loss but will the social network survive it or will it go down the slope and make another internet company failure in stock market.

In 2011, the likes of LinkedIn, Groupon and Zynga took to the stock market and landed on the ground with a thud. However, for many reasons, including Facebook’s strong presence on the internet, the May 18 IPO was considered to be exception to these aforesaid examples.

For some reason, Facebook’s position in the stock market does not look promising. The company is yet to show a solid earning commodity. Internet and the whole technology world changes colours more speedily than any other tech in the world. Valuation in stock market that everybody consults before investing in a company is all dependent on future promises that the company makes and its expected profitability in the future.

Facebook has failed to provide such matrices to the satisfying level. The only thing that created the hype in its IPO was media that heavily depends on social networking these days. But that is all free-of-cost, this social networking; that is the chunk in it.

Take the example of a company that became a success in the stock market merely on the basis of its number of users that used its services for free.

Advertisements brought around $4 Billion in revenues to Facebook, which was made the strongest point in its performance chart. To clear that up, its revenue and not profit. The net profit of the company last year was not more than $2 Billion, and all of that came from advertisements.

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Posted by Usman Khalid on May 26 2012. Filed under Business, Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.